Soft drinks group Britvic stayed tight-lipped yesterday on its £1.3 billion merger talks with Scots peer AG Barr as it posted lower annual revenues following the costly recall of a product and poor summer weather.
Britvic, maker of J20 and Tango as well as Pepsi under licence, and AG Barr, manufacturer of Irn-Bru, had been given an extension by the City Takeover Panel until the end of October for a firm offer to be made.
In a trading update, Britvic revealed that sales had lost their fizz in its final trading quarter, with revenues down 4.3 per cent in Britain and 8.5 per cent in Ireland.
It led to a 0.8 per cent decline in yearly sales to £1.26bn, the falls cumulatively overshadowing a 13.3 per cent advance in Q4 revenues in France.
The latest setback will delay a recovery in Britvic’s shares, which were hit last July after a profits warning following the recall of its popular children’s drink Fruit Shoot due to faulty caps.
Analysts sharply downgraded full-year profit expectations and hit out at the “credibility” of management at the time after it revealed the recall would slash profits by between £15 million and £25m.
Only a week before Britvic had said the profits fall would be much less, at between £1m and £5m. Paul Moody, group chief executive, said yesterday that the recall had wiped about 2 per cent off annual revenues.
Moody said: “Following the [recall], we have been focused on returning supply to normalised levels. A further key brand priority has been to ensure that we build and realise the value of our emerging US Fruit Shoot.”
He added that, despite the Fruit Shoot embarrassment and sliding revenues, Britvic “continue to place a strong emphasis on cash generation and rigorous cost management”. The group would only say that the talks on the all-share merger with Barr, which would create one of Europe’s biggest soft drinks businesses, were “ongoing”.
Cumbernauld-based Barr also declined to update on the progress of the talks – first divulged on 5 September – when it posted its interim results late last month.
There has been speculation that the merger of Britvic and Barr, whose other drinks include Rubicon and Tizer, could trigger redundancies contributing to what the City estimates would be revenue and efficiency synergies from the tie-up of at least £20m.
Barr employs nearly 1,000 staff, of which 430 are at Cumbernauld. Britvic employs some 3,500, about 300 of them at its new Hemel Hempstead headquarters.
There have been reports that one sticking point to a settled deal is disagreement over whether to call any new entity “Britvic Barr” or “Barr Britvic”.
Top jobs in the potential combination have been confirmed, however, with the Scottish group’s chief executive Roger White to take the same position in a merged group.
Britvic chairman Gerald Corbett would chair the board, while Ronnie Hanna, chairman of Barr, would become deputy chairman. John Gibney, chief financial officer at Britvic, would keep his position.